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7. Suppose that a 5 year coupon bond of face value $ 100 and coupon rate 3% sells for $ 98 dollars, and that a 5 year coupon bond of face value $100 and coupon rate 7 % sells for $ 102. Both bonds pay coupons annually. (a) What portfolio composed of these two different bonds replicates the payoffs of a 5 year coupon bond of face value $ 100 and coupon rate 5%? (b) If there is no arbitrage, what would be the price of this 5 % coupon bond? (c) Suppose this 5 % coupon bond sold for a price of $ 99. What arbitrage trade could you make to get a riskless profit today in exchange for nothing in the future? 7. Suppose that a 5 year coupon bond of face value $ 100 and coupon rate 3% sells for $ 98 dollars, and that a 5 year coupon bond of face value $100 and coupon rate 7 % sells for $ 102. Both bonds pay coupons annually. (a) What portfolio composed of these two different bonds replicates the payoffs of a 5 year coupon bond of face value $ 100 and coupon rate 5%? (b) If there is no arbitrage, what would be the price of this 5 % coupon bond? (c) Suppose this 5 % coupon bond sold for a price of $ 99. What arbitrage trade could you make to get a riskless profit today in exchange for nothing in the future